There are only two ways out of the current situation
1. Defaults on a massive global scale, new currencies (gold will rocket)
2. Inflation, which is very hard to keep a lid on once it starts (gold will rocket)

The only risk is that holding gold may be made illegal again, so take precautions

 

PMSL!!!

 

I think gold over the next week or so retraces back towards 1,645, this scenario would be invalidated if it reasserts to trade higher than 1770

 

Is that based on your own technical analysis alloy?

 

Yes, can see several reasons to be profit taking or speculatively getting short (i've sold gold short on my PA account this morning at 1742 )....can throw a chart up if it is of interest to anyone

 

That would be good thanks. I'm quiet interested.

 

DISCLAIMER: NOT ADVICE Do your own research!

Above chart is 60min chart of gold.

1) I can see a head and shoulder reversal formation (the red arcs and red trend line) which is activated on the breakdown of the neckline. Usually a safer entry to this trade would be to wait for the violation of the trend line and look to short gold on the retest of it.

2) The yellow line shows gold making a higher high, however the yellow lines on the RSI and MACD are making lower highs, this is what is called bearish divergence, and signals weakness and pending trend reversal.

3) There is also some bullish divergence of price vs RSI which is counter intuitive to a bearish view (the pink line on the 11th and 12th), however with this short term bullish signal there has seemingly been no follow through which i read again as continued weakness in relation to prior strength.

4) A measured move targets 1657.

5) On the daily chart from the July low to Aug high, the 50% fib retracement targets 1646, if we look back to the 60min chart, specifically 3rd,4th and 5th, we can see that there is congestion around the 1640-80 level, so all of are targets suggest a move towards this area of congestion and seeing how gold consolidated at these prices it is reasonable to assume there will be some support here.

6) The right hand shoulder on the 60min has a high of 1769.5 and the left shoulder has highs of 1779, so if gold takes out these levels it would invalidate the reversal formation

7) The bollinger bands trade inside the keltner channels, indicating a relative lower level of volatility. Usually a precursor to an explosive move. Signal has not yet fired off but in the context of everything else the picture is telling us my intuition suggest that move, when it comes, takes us lower.

8) A close below 1732 (the low of the high day, 11th Aug) would really get me salivating at making some money short gold.....this is yet to happen.

 

Sorry retarded question: is the RSI going up to 0.7 a buy signal? I thought it mean overbought for some reason?

What is the purple? Is that your new down trend line in theory? Are you talking about it being safer to wait for gold to puncture this line or the red one before shorting the rebound?

Thanks for your analysis BTW, very interesting. I'm using Google to find out what half of it means.

 

I disregard the use of oscillators to highlight overbought and oversold, markets can remain in these states for months even years so it has little use to me.

The purple line is not a trend line, it just serves to highlight how the market made a lower low but the RSI made a higher high, which is bullish divergence.

The redline, which i have titled "neckline" is the line you look to see gold break and then retest to enter on a more conservative tack.

 

I was thinking if you go with the moving average trend then now offers value. The exact opposite of what you are saying, although it's probably not the ideal 'look' to the chart I admit.

 

My setup isn't complete yet, you could still be right....

 

what moving averages are you looking at?

 

Sorry my bad.

It's still quite high about the 20 day moving average.

 

Bloomberg is .

Cheers for the insight.

 

IIRC he had a pretty substantial long position as recently as July?

 

Paulson is having a shocker this year, down nearly 30% IIRC

 

I read that too!

 

It does make sense that there will be some kind of correction now. Things seem to be settling down, there isn't so much volatility, that statement by the Fed having had the effect they intended.

With the structural economic problems that the west faces and the political 'solutions' which are so far being used, it's actually not a long shot to imagine this just being the beginning of one massive bubble that might culminate with quite a lot of the general public buying gold in one way or other.

 

The crowd have been into gold for some time now, you never used to see shops on the high street who would buy your gold for cash.

 

Yes, they buy and the public sells. Once the public is rushing to own gold, then you have one hell of a bubble!

But yes, in terms of the investment community, it seems it's no longer the minority view to be expecting inflation and owning gold to hedge against it.

Even amongst those big players, it's surely not bubble status yet. Wait till the end of QE3, QE4. Depending on the nature of monetary policy from here on, this has the potential to be massive. I just can't see what event could trigger the sell off and result in a bear market right now.

 

Can't understand why I have always found money and associated matters mindbendingly boring!

Les

 

Hi Alloy. What's the best way to access similar data and the tools you have there....without paying a fortune?

Gold at 1779 last check. Looks like it invalidates the thing you were on about? Choppy trading for a while?

 

Yup invalidates the head and shoulder scenario, although the picture i showed you was never technically validated. Im still short gold though as im only down what i'm up being long platinum, more bearish divergence today against RSI on the hourly still could see gold have a crack lower, strength today probably due to equity weakness and obviously we have the EU talks today so it is all pretty much a lottery with such big impending news that could see risk on/off.....

Any charting software will be able to mostly replicate that data....any of the spreadbetters/CFD providers etc offer free charting programs with their accounts

 

Tony - IG index free charts are not bad. But there is - or at least used to be - an advanced charting service which you paid a little every month for. They were decent, but still not Bloomberg quality!

 

Thanks, will have a look at that. I was just looking at stockcharts.com as well.

Alloy - yes it certainly would seem a lottery ATM.

 

That doesn't mean there isnt trade opportunities, it just means directional one way positioning is high risk, hence why if im short gold i'm long platinum to net off that risk and stay hedged

 

In the US there is a great PC tool called Telechart by Worden - good for the amateur.

Not sure if there is anything similar here.

Telechart makes it very easy to compare stocks and find stocks that meet your pattern - you can simply scroll through your selection in a fraction of a second by hitting space. If you are looking for specific patterns it means you can filter hundreds of stocks in an hour.

 

i have been told that one problem with gold as a hedge mechanism is that if too many people try to sell -- the price goes down quicker than a cheap hooker

but I suppose that is true of stocks too

 

Yes, gold has been accentuated as all it is, is basically an inflation hedge with a modicum of industrial use. It has no yield, its value is purely driven by supply and demand. The gold trade is so overcrowded, everyone is in it, when there are signs of inflation curtailing this sucker is heading south quickly......of course the skill is in timing....for the moment at least with QE3 rumours and inflation still motoring the crash is not nigh, however there will be corrections-short opportunities for the contrarian, or buying opportunities for the herd. Which one are you?

 

Wild day on the markets eh? Gold at record high now.

Looks like a very difficult time to make money, it's so unpredictable.